Close your eyes.
Now imagine yourself in a large whitewater raft barreling down a string of frothy rapids. Sometimes out of control, trying desperately to manage your terror. Sometimes slow and easy, catching your breath and reassuring yourself that “You Got This”. Crying a little. Laughing a little. Not knowing what’s around the corner…with no destination in sight.
Congratulations, you have just experienced what it’s like in the current state of the legal market.
For most of the professional world, 2021 was a 500mph blur. The economic bounce from the pandemic was extreme and its vibrancy was reminiscent of the flush days of the dotcom boom on steroids. But as we approached the end of Q2 2022, converging factors including the war in Ukraine, fast growing inflation, a corpse-like supply chain and ballooned company valuations collectively chopped the thriving economy off at its knees, sending stocks plummeting and freezing the IPO and SPAC queue. The free flow of investor money also significantly tightened, leaving many emerging companies gasping for air to survive.
This about-face has undoubtedly affected the legal market. But exactly how? Below is a finger on the pulse of the current state of affairs in the legal profession.
From September of 2020 to roughly May 2021, legal hiring was on a tear. All levels, all industries, big companies and small companies, startups and public companies. A hot liquidity market, in house legal department expansion and increased demand for legal services drove the excessively high demand for Legal Eagles. This, in turn, created an opportunity glut in the market without enough A Players to fill critical in house or law firm legal roles.
Suddenly, candidates found themselves feasting from a smorgasbord of opportunities – and the balance of power heavily tipped to the candidate pool. As a result, it drove compensation higher every six weeks, created title inflation and increased candidate mobility. In other words, it was a hiring manager’s worst nightmare.
Since mid Q2, the legal hiring market has cooled off, but still maintains some activity.
Emerging Company Hiring
The bevy of IPO beauties scheduled to go public this summer has hit the brakes. Some of these companies were grossly overvalued and have lost that IPO window for what might be…forever. The Real Deals are taking inventory in the Fall but are realistically aiming for a Q2 or Q3 2023 debut. With companies no longer screaming to the IPO or SPAC finish line – or for those who are experiencing serious financial pain, legal hiring has materially slowed in this market vertical. But there are some silver linings. There has been a slight gain in steam over the last 3-4 weeks with increased filings and smaller company IPOs. In addition, companies are continuing to hire strategically and replacing those who have left for greener pastures or who aren’t making the cut. Some companies are slowly continuing to build their departments in preparation for their 2023 liquidity event. Substantive areas of demand include product, commercial/SaaS, compliance and regulatory. CLO/General Counsel opportunities are still out there but in far fewer numbers than in Christmas Past. Some CEOs who contemplated senior CLO hires, have downgraded this leadership role to “GC Light” while the market is in flux.
Public Company Hiring
Public company legal departments have been expanding for several years. During the post Covid hiring boom, these departments ballooned, and hiring moved at a frenzied pace. But today, their hiring activity is a mere shadow of itself. Many, if not all the MAANG’s (Meta, Amazon, Apple, Netflix, Google) implemented some form of hiring freeze over the summer, forcing current employees to absorb the extra work without additional support. Newly public companies have also yanked the reigns on legal hiring, taking a wait and see approach for the remainder of 2022. Companies in regulated industries (i.e., fintech and life sciences) are continuing to hire, but more selectively. Desired practice areas for hire include privacy, product and commercial/SaaS.
Law Firm Hiring
One big surprise in this market is that the law firms have not hyper-reacted with mass layoffs…at least yet. Demand for lateral partners with strong books of business with good billing and realization rates is still high (when isn’t it?), but scrutiny on the business has been heightened and book requirements have increased. On the associate side, law firms have slowed way down on their hiring and are pulling the trigger opportunistically on gold-plated candidates.
It didn’t seem like there was an end in sight for the skyrocketing compensation for lawyers. Today, compensation remains elevated and is holding steady, but its rocket ship trajectory has slowed. The negotiation dynamic between candidate and employer has also changed, which has influenced the slowdown and current market numbers.
How so? Example: During the crazy busy times, employers extended aggressive first offers. Candidates countered even more aggressively. Employers would either meet the counter or come darn near close, which often exceeded the top end of their comp range. Now the dynamic is more tempered. Slightly less aggressive first offers are met with far quieter counters – creating a result that doesn’t break the bank. Of course, there are still some outlier candidates who haven’t gotten the economic crisis memo and are demanding exceptionally high compensation packages. But these demands have been largely unanswered since May. For those seeking the new market compensation numbers, I will provide this information in a separate article that is coming soon.
Covid forced the world population into their homes – and in order to keep the globe spinning, “remote work” was a must. So, people set up shop in their basements, bedrooms, and dining tables. They created a home office environment where they could take conference calls in their slippers while feeding the family dog. Employees got used to remote work…and liked it.
Today, the pendulum has swung closer to greater facetime in the office and an increasing number of companies are requiring their employees to show up in person. Initially, it started with once a week (or if an employee was remote, traveling to HQ once a quarter). Today, the norm is a 2x-3x/week in office requirement. A much, much smaller percentage of companies is back to 5x/week. Pure remote opportunities are still offered in today’s market, but their numbers are dwindling. As the risk of Covid becomes less life-threatening and we integrate its threat into our daily lives and normal routines, the professional world will continue to revert to pre-pandemic corporate norms. So, if you are looking for a new job, be prepared to brush the dust off your fancy shoes and come to the office for a little face time.
Company layoffs are becoming a more common occurrence in today’s corporate landscape – some are quiet, and some are big and loud. Despite the increased activity in this area, lawyers have largely been spared. Corporate legal departments are holding on to their legal talent (except in instances of company wind-downs, acquisitions, or financially depleted companies) – and as mentioned above, in some instances still growing. Law firms have quietly laid off some associates and are nudging non-productive partners towards the exit, but mass associate layoffs haven’t caught fire (yet).
The world has experienced many twists, turns, cartwheels and somersaults over the last 2 ¾ years, which has impacted all aspects of the legal profession. The latest contortion has put the legal market in a state of flux with some slowdowns and silver linings as well as trends that will continue for the foreseeable future. We haven’t reached our destination with this uncertainty just yet, and for those panicking in these turbulent waters, rest assured, our profession is resilient and will weather this storm. So, take a deep breath and repeat after me:
“You Got This!”